THE last time I talked to Kevin Landis was over lunch at Le Bernardin, the haute French restaurant in Manhattan, back in the fall of 2000. At the time, the air hadn’t yet gone out of the Internet bubble, and as manager of the tech-focused Firsthand family of mutual funds, Mr. Landis was feeling pretty good about the fact that assets under management had gone from $2 billion to more than $6 billion in a matter of months. In fact, he was more than a little cocky. (So was I — reporters don’t eat at Le Bernardin anymore, at least if their publisher is paying.)
So with the 16 percent rise in the Nasdaq this year, not to mention the meteoric rise of stocks like Google, which recently passed $600 a share for the first time, Mr. Landis is again feeling good. His flagship Technology Value fund is up 27 percent this year and has had an average annual return of 26 percent over the last five years. But he’s no longer so cocky — that got knocked out of Mr. Landis the hard way, when Firsthand suffered huge losses as the bubble finally burst early in the decade.
“You don’t want to ask for those numbers,” he jokes. “It’s still painful and it always will be, and not because my mom’s in the fund. It goes on your permanent record, like in school.” In 2001, the Technology Value fund dropped 44 percent, and then plunged 56 percent in 2002. Firsthand’s total assets under management, now about $750 million, are still a small fraction of what they were in 2000.
With the fund’s record of being up, down and up again, it seemed like a good time to ask Mr. Landis if tech investors are enjoying Web 2.0 or Bubble 2.0, as many commentators put it.
He says that while individual names like Research in Motion and Apple have begun to get pricey, the broader tech sector “has got plenty of room to keep running.” And unlike 2000, when the likes of Dr.Koop.com and Webvan went through the roof, no longer can just about any dot-com stock win investor enthusiasm. As for Google, he says “it’s pricey, but not hugely so.” Google is “a one-trick pony,” he says, referring to the fact that most of its revenue is from search-related advertising. “But it’s a hell of a pony.”
More established tech names like Intel and Cisco — both of which still trade well below their bubble-era peaks but are up more than 20 percent this year — have become mature, almost old-fashioned blue chips, with steady, if not exceptional returns, he says.
That other tech giant, Microsoft, has a cloudier future, he predicts. It’s flat for the year, and Mr. Landis says “they’re going to have a hard time generating much more growth.”
“Microsoft conquered the desktop and then the server room,” he adds, “but what the heck else is out there for them?”
Back in the fall of 2000, Mr. Landis was excited about the tax-cut plans of George W. Bush, then running for president, and less than enthralled by Al Gore. Today, though, he says he has a new appreciation for Mr. Gore, who just won the Nobel Peace Prize, and his green agenda, at least when it comes to alternative-energy companies that might gain from development of solar power.
One favorite is SunPower, which makes solar panels that are much more energy-efficient than their predecessors. SunPower’s shares have doubled this year, but Mr. Landis’s preferred way of playing it is by holding Cypress Semiconductor, which owns 53 percent of SunPower but trades at a more reasonable price-to-earnings multiple.
Another pick on this theme is Applied Materials, a semiconductor play. “These new solar panels are an offshoot of semiconductors,” he says.
OF course, this sector has enjoyed a spectacular run already, with First Solar now at $136, up from $30 at the beginning of the year. But Mr. Landis is hopeful. “Alternative energy isn’t where the Internet was in 1999,” he assures me, with a touch of the exuberance that made him a regular on CNBC years ago. “It’s where the Internet was in 1980.” Old ways die hard, I guess, and in Silicon Valley, where Mr. Landis grew up, the next big thing is always just around the corner.
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